Peter Schiff sees stagflation of the 70s playing out where prices rise and economic activity deteriorates collapsing living standards 

But could the Fed’s restrictive policy, now eleven rate hikes pushing Fed fund rates to 5.5 % blow the wheels of the bus?

One year ago the Fed fund rate was 2.5% today it is 5.5%. One year ago CPI was 9.1% today it is 3%. 

So the Fed’s restrictive policy is working.

But the Fed’s most prized customer, the US treasury, could have difficulty paying over one trillion dollars in interest rate paying with Fed funds at 5,5%.

“Peter Schiff sees stagflation of the 70s playing out”

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Peter Schiff sees stagflation and he believes the Fed will concede to the inflation fight

“I think the most significant admission Powell made was that the Fed is going to start cutting rates long before the inflation gets down to 2%. 

I think the Fed might start cutting rates even as the CPI is trending back higher,” he said. 

Fed Powell said no cuts this year, but since when have investors done well believing the Fed?  

Higher input costs are why Peter Schiff sees stagflation 

He noted the drop in headline CPI from 9% to 3% was due to a 50% fall in oil prices since last year, until a couple of months ago. Last three months oil prices are up 25%.

“I think we are starting a new move that will take oil prices to new highs.

and that is going to put a lot of upward pressure on headline CPI before the end of the year, and that is also going to put downward pressure on the economy,” he said. 

“I think we are starting a new move that will take oil prices to new highs”

PETER SCHIFF

“I think the Fed is wrong on its recession outlook, and we are going to have a recession, it is going to be a severe one, and inflation is going to worsen,” he said. 

“Rates are too high because we have too much debt. We cannot afford these higher rates. Putting this in perspective, 22 years ago, the last time we had 5.5% Fed funds, the national debt was 5.6 trillion dollars it is now 32.6 trillion dollars

If we had to pay 5.5% on the national debt, that is 1.8 trillion dollars in interest on the debt. The defence budget is 840 billion dollars.

“We are now sitting on a powder keg of debt, which is going to explode at any moment” – Peter Schiff

Interest on debt is more than twice what we spend on the national debt.,” he said. 

“What could force the Fed from rising is an insolvency crisis at the government, corporate and personal levels. 

When the Fed starts easing, it could put gasoline on the inflation fire,” he said. 

The working class, working poor, will be decimated by higher inflation,” he added.   

Peter Schiff believes the Fed enabled reckless fiscal government spending by suppressing rates and monetising the debt. 

“We are now sitting on a powder keg of debt, which is going to explode at any moment,” he said.  

Where to invest as Peter Schiff sees stagflation? 

“Get out of the dollar, you want to own real money, gold and dividend-paying stocks. You want to be in anything inflation sensitive, basic materials, energy, agriculture,” he said. 

Peter Schiff sees investments that worked in the 70s being a blueprint for investing today.